Financial Services Ireland

Payments: An industry in transformation

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Payments: An industry in transformation

Payments providers are being increasingly challenged to balance the demands of regulator and customer. The speed and breadth of change is challenging both existing players and new entrants to continually adapt to remain competitive. Banks and other payment service providers are faced with a myriad of operational, functional, regulatory and information security risks, while also trying to lower overall cost and improve client experience.

Market context

  • Increasing regulatory pressure and customer expectations
  • Reducing margins as cost pressures are exacerbated by downward pressure on processing fees
  • Increasing numbers of new entrants in the payments space; along with emerging technologies with potential to disrupt, enhance and enable payments services
  • Increasing focus on real-time processing, transparency and the importance of liquidity
  • Emergence of new business models that use and support payments innovation to engage closely with customers

Regulatory pressures

  • The burden of compliance driven by both payments-specific regulation, and the consequential impact of broader regulatory measures:
    • The revised European Payment Services Directive (PSD2) and Open Banking, Immediate Payments, interchange fee regulation, Electronic Money Directive (EMD), intra-day liquidity, AML and sanctions, structural reform, etc.
  • Increasing need to demonstrate robust controls and resilience in light of high-profile market incidents

Customer expectations

  • Making payments is seen as a core capability for customers and getting it wrong can have a serious impact on customer loyalty and trust
  • Payments spans a broad range of services, demanded by customers ranging from individuals to the global treasurers of large multinational businesses
  • The way customers are making payments is changing with emergence of new channels and alternative payment methods; with the payment becoming the anchor for a wider

What does this mean for the payments industry?

With a complex global business environment and multiple drivers for change, firms of all types, from established international institutions to start-up alternative providers need to address the challenges presented from all dimensions. All participants need to balance the needs of the customer with the demands of the regulator, and define for themselves a role in the new ecosystem, recognizing that the ability to collaborate will be as important at the ability to compete.

Ultimately, the most successful firms will be those who deliver payment products and services that provide excellent, compliant customer service, without compromising the fundamentals: access, convenience, timeliness, stability, efficiency, reliability, security and transparency.

Banks, payment providers, large corporations and other FS organizations face interrelated challenges when responding to the evolving payments business and regulatory landscape. These challenges impact business models, enabling IT and operations, and approaches to risk and compliance.

If you would like to discuss Payments with our ET advisors in more detail, please don’t hesitate to get in touch with me, or your usual EY contact.

Colin Ryan

Partner, Performance Improvement
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Payments Brochure

Payments

An industry in transformation